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Title: |
Intra-industry Trade, Endogenous Technological
Change, Wage Inequality and Welfare |
| Author: |
De Santis,
Roberto A. |
| Author
Affiliation: |
European
Central Bank, Frankfurt am Main |
| Source: |
International Economic Journal, Autumn 2002, v. 16, no. 3, pp. 59-79 |
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Publication Date: |
Autumn 2002 |
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Abstract: |
By using
alternative intra-industry trade models (1. new goods cannot be
introduced into the economy; 2. the possibility for a set of capital
goods available in the economy to vary; the models consider the
existence of intersectoral linkages), I show by means of Applied General
Equilibrium (AGE) analysis that trade rises wage inequality between
skilled and unskilled workers; but the impact on wage inequality is far
larger, when countries are assumed to exchange differentiated capital
goods. The latter result has been obtained by using an imperfect
competitive model, which embodies a sector bias technological change
that arises from trade. In addition, the gains from trade, insignificant
under the standard trade hypotheses, are extraordinarily large when
endogenous technological change is taken into account. The main policy
conclusion is that if policy makers of flexible wage economies introduce
trade barriers to reduce wage inequality, these protective measures, by
affecting the diffusion of technology, would cause a large welfare loss. |
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